A recent survey prepared by the Economist Intelligence Unit reveals that high-performing corporations are seeking new ways of operating. Of the 585 worldwide senior corporate executives that were interviewed, 58% said they want to improve their company's profitability significantly — or even radically — over the next two years. And to reach their performance goals, 56% of surveyed executives want to significantly change their operational strategy.1
For a company to achieve these goals, and sustain and increase its competitive superiority in the market, it must first strive for operational excellence. I define operational excellence as the quest to reliably meet and exceed customer expectations with cost-effective and efficient operations. It's the pursuit of conducting business to continuously improve the quality of goods and services, reduce costs, increase speed, and enhance flexibility to achieve competitive superiority (see sidebar).
All told, operational excellence boils down to a fundamental business concept: It's a company's commitment to consistently deliver quality products or services to customers at the right cost, in the right quantities, on the right dates, and at the right locations.
But it's not easy.
Key Term: Operational Excellence
Operational excellence is a company's commitment to consistently deliver quality products or services to customers at the right cost, in the right quantities, on the right dates, and at the right locations.
Overcoming the Barriers to Operational Excellence
There are severe obstacles to gaining cost savings and operational efficiencies, many of which stem from nonstandardized processes and nonharmonized IT landscapes, leading to a lack of visibility into current operations (see Figure 1).
Typical obstacles for global corporations trying to achieve operational excellence
Remember too that no company exists in a vacuum, but instead works in a networked fashion. Network players select complementary strategies to deliver more value to the market collectively, rather than going it alone.
Think about what this means for your business processes. For example, while they used to start and end within the boundaries of the organization, today any process — a manufacturing operations process, for example — will inevitably cross multiple business boundaries as parts of the process are reallocated to partners in a business network.
In this networked economy, the question quickly becomes: How can you support your company's drive for operational excellence? It's not enough to simply plug in a standard solution and hope for the best. That's why SAP focuses on end-to-end business processes, not software components.
SAP's End-to-End Process Approach to Operational Excellence
At SAP, our focus is to integrate related business processes across company boundaries — and to use our understanding of the relationships in a network to help customers achieve their goals. Today, our offerings allow organizations to establish business process platforms; these platforms provide the foundation and flexibility they need to transform their business network.
But many customers will be delighted with SAP's new approach: Our solutions can now also support their end-to-end industry processes with configurable, process-oriented functionality.
To help customers achieve operational excellence, SAP is delivering — to start — a set of four business processes, described below. These end-to-end processes, designed to support and be a seamless part of real-life business scenarios, are the first series of processes planned for delivery with the next SAP Business Suite release (see sidebar).
Integrated Sourcing and Procurement
Companies can achieve sustainable savings only by closing the loop between the strategic sourcing cycle and the procurement order cycle. This end-to- end process encompasses strategic sourcing, contract management, operational procurement, and spend analytics functionality.
Services, including SAP Consulting's procurement value assessments, can help your company evaluate its potential in this area by helping to analyze your business process strategy, for example.2
Efficient Manufacturing Operations
Companies are challenged to run their manufacturing operations and assets at the highest level of efficiency, to improve quality and profitability while complying with safety and environmental regulations, and to eliminate waste both in production and across the value chain to enhance visibility into products, operations, suppliers, and customer relations. This end-to-end process includes enterprise planning and control, plant and cell level planning, and control and manufacturing execution capabilities.
Great starting points here would be to evaluate and leverage services offered by SAP, including SAP Business Process Strategy Analysis, SAP Solution Business Value Assessment, Adaptive Manufacturing Value Assessment, and Supply Chain Management Value Assessment.3
Efficient After-Sales Service
After-sales service is an important competitive differentiator and source of revenue for an organization. This end-to-end process includes service sales and marketing, customer care, service planning and execution, service parts planning, service parts warehousing, service parts sales, and service parts claims and returns functionality.
To get started with an after-sales service strategy, I'd encourage you to use SAP's strategic consulting offering entitled SAP Business Process Strategy Analysis — Service Parts Management Business and IT Roadmap.4
Continuous Performance Improvement
Complete visibility into operations with fact-based information is fundamental to managing operational performance and ensuring continuous improvement. This process includes operations performance visibility and analysis capabilities for operations processes.
To help you identify the right performance-improvement approach for your company, SAP Business Consulting offers SAP Business Process Strategy Analysis — Balance Score Card Services.5
The process overview explained in this article is for informational purposes only. This information represents SAP's current planning view. Any forward-looking statements for capabilities planned beyond the currently available releases are subject to change.
Digging Deeper: A Specific Operational Process Example
Perhaps the best way to understand how customers will use this new process approach in their day-to-day business is to walk through an example.
Consider the process of enterprise planning and control on the shop floor. Manufacturing throughput is often constrained by inflexible planning processes and scheduling systems, which can obstruct a manufacturer's ability to adjust to changes in customer demand. With new and evolving responsibilities, companies struggle to bridge the demand and execution gap on a work center level — or even on different plant levels across the enterprise.
If output is not aligned with customer demand, financial and delivery performance deteriorates. What's more, production will not be able to serve customers' demand pull, negatively impacting costs with expedited orders and increased freight charges.
With its process-focused approach, SAP can help bring increased visibility and responsiveness to your operations and integrate manufacturing with the broader enterprise by:
- Creating a product schedule that automatically factors in manufacturing lead times and capacity requirements
- Generating a production plan that considers business objectives and relevant manufacturing and supply constraints
- Managing release stability despite demand variation by comparing forecasts with planned deliveries
How does SAP deliver these capabilities to customers? Through a combination of SAP ERP, SAP Supply Chain Management (SAP SCM), and SAP Manufacturing Integration and Intelligence (SAP MII) in one integrated, end-to-end process. The goal is to maximize throughput and return on assets. And with the combination of these applications, SAP helps improve production scheduling, including the coordination of customer requirements, start-up volumes, and downtime (maintenance, holidays, and shutdowns, for example). This process approach will help you ensure that customer demands are met.
Why Is SAP the Right Partner to Deliver These Operational Processes?
In order for this process approach to work, you need integrated applications that you're confident will all talk to each other — any disconnects would undermine your business processes. SAP is uniquely positioned to provide this integration.
Underlying all of these business processes is SAP NetWeaver, the glue that holds together this process-focused approach to application service delivery. (If you're not yet on the SAP NetWeaver platform, I recommend you move there to take advantage of these business process deliverables.) And beyond SAP NetWeaver capabilities, we're also leveraging an enterprise-service oriented architecture (enterprise SOA) to make all the necessary integrations happen.
|Processes are the wave of SAP's future; you would be well served to align your IT plans and operational business strategies with a process-focused mindset.
Of course we recognize that businesses and their network partners will not be using only SAP applications. So with enterprise SOA, SAP is helping its customers evolve from a world of nonintegrated processes, heterogeneous system landscapes, and mainly people-driven, transaction-based, internal efficiency-focused operations to event-driven processes based on an adaptable, flexible, and open IT architecture for developing services-based solutions.
Armed with SAP's business processes for operational excellence, customers can adapt quickly as demands and processes change over time, involving the entire network in this business transformation (see Figure 2).
Achieving operational excellence requires a commitment to synchronized operations
Summary and a Look Ahead
To help companies achieve operational excellence, SAP is offering natively integrated industry processes on one open platform, planned for delivery in late 2008. Built on an enterprise service-oriented architecture, these modular industry processes allow companies to specialize in their chosen strategic role with increased flexibility and efficiency while also collaborating with their business partners.
But this is only the first series of processes for achieving operational excellence — SAP's offerings will only expand through 2009 and 2010; we're planning on delivering even more of these value-driving, end-to-end business processes in the future, based on feedback we hear from customers about which processes are most valuable to their business.
So what can SAP customers do today? Prepare yourself for this new approach when you're considering any new systems and as you develop your company's long-term IT strategy. Processes are the wave of SAP's future; you would be well served to align your IT plans and operational business strategies with a process-focused mindset.
- "What You Need to Know About SAP xMII to Enable Adaptive Manufacturing" by Mo Ghanem (SCM Expert, Volume 4, Issue 9, www.scmexpertonline.com)
- Production Planning and Control with SAP by Jörg Dickersbach, Gerhard Keller, and Klaus Weihrauch (SAP PRESS, http://store.sapinsider.wispubs.com)
- The Business Process Management 2008 conference in Las Vegas, November 17-19, 2008, to garner new strategies for operational excellence and innovation (www.sapbpm2008.com)
Rolf Weiland (firstname.lastname@example.org) is the Vice President of Suite Solution Management for Operational Excellence at SAP AG. He has been with SAP for four years in different management positions including SAP procure-ment solution management. Prior to joining SAP, Rolf held several management positions in leading companies including Ariba, i2 Technologies, and JD Edwards. He holds a degree in business administration with a focus on manufacturing industries.